PETALING JAYA: Interest by oil and gas giants ConocoPhillips, Pertamina and TotalEnergies, among others, in Sabah lately has not gone unnoticed by industry watchers.
Already enjoying a strategic collaboration with Petronas that has translated into consistent additional revenue for the State since 2020, their participation may well be what the State needs to take the sector to the next level.
At the local level, there has also been an uptake in participation by Sabahan firms in the downstream sector.
window.googletag = window.googletag || {cmd: []};googletag.cmd.push(function() {googletag.defineSlot('/22826383987/dailyexpress_inline', [1, 1], 'gpt-passback').addService(googletag.pubads());googletag.enableServices();googletag.display('gpt-passback');});The result may mean that the State would likely benefit the most from its not-fully-tapped hydrocarbon wealth.
Half the State’s RM8.7 billion revenue now comes from the sector and appears certain overtake proceeds from palm oil and tourism – the state’s two other major revenue contributors – in the near term.
“Major international O&G companies are committing towards further exploration, development and production in the state,” said Dionysia Kibat, CEO of SMJ Energy, the State vehicle entrusted to make that happen.
According to her, the state now leads the rest of the country in near-term FDIs (Foreign Direct Investments).
Shell Malaysia and ConocoPhillips have extended their production-sharing contracts (PSCs) to 2050, while PTTEP Malaysia is ramping up deepwater redevelopment in Blocks H and Kikeh.
Dionysia said these partnerships are already providing a substantial boost to state coffers.
“Approximately half of the state government’s revenue of RM6.7 billion is derived from oil and gas activities in the form of cash payment and SST.”
She attributed the sustained investor confidence to Sabah’s collaborative engagement with Petronas, contrasting it with Sarawak’s legalistic and litigious stance.
“To date, this collaborative partnership has demonstrated commercial and financial success for Sabah,” said Dionysia.
In 2021, Chief Minister Datuk Seri Hajiji Noor’s administration signed a Commercial Collaboration Agreement (CCA) with Petronas, allowing the state greater say, revenue and participation in the O&G industry while respecting national laws, including the Petroleum Development Act 1974.
SMJ Energy, a wholly-owned entity of the Sabah government established in 2021, has been tasked with overseeing, managing, and coordinating the state’s participation across the entire O&G value chain.
“The CCA provides a commercial solution to overcoming the issue of O&G rights in Sabah while preserving the existing legal rights and privileges belonging to the state and federal governments,” said Dionysia.
Through the CCA, SMJ Energy has acquired equity in multiple ventures: a 50% stake in the Samarang PSC, 25% in Petronas Chemicals Fertiliser Sabah, and 10% in a Petronas LNG plant in Bintulu.
These have yielded RM1.8 billion, RM323 million, and RM866 million respectively in dividends and revenue.
“Dividends from SMJ—amounting to RM160 million to date—have been channelled back to the state government.
“SST paid to the state by SMJ Energy amounts to RM91 million to date,” she said.
Sabah’s oil and gas service and equipment (OGSE) industry is also seeing marked growth under the CCA framework.
“For Q1 of 2025, the value of OGSE work already awarded to Sabah contractors amounted to RM582 million, compared to RM613 million for the whole of 2021,” Dionysia noted.
“In 2024 alone, Sabah OGSE contractors were awarded RM2 billion worth of work, demonstrating Sabah as a OGSE powerhouse for the future.”
SMJ is also working with Petronas to ensure adequate local gas supply to spur downstream industrialisation.
“We’re jointly ensuring the availability of gas supply for a RM20 billion investment (in three phases) by E-Steel Enterprise Sdn Bhd to build a hot briquetted iron plant in Sipitang Oil and Gas Industrial Park, and Phase 2 of the SBH Kibing New Solar Energy SB’s solar glass plant amounting to RM7.2 billion,” she said.
Asked about SMJ’s strategic posture, Dionysia said the company would remain a financial investor in producing assets with strong cash flow.
“We work within our limitations and financial resources. SMJ Energy will do away with exploration risk and will not assume an operational role in its upstream investments for now.”
She said SMJ leverages “free carry interests” and “contractual back-in rights”—mechanisms that allow it equity participation without initial capital exposure.
A deeper partnership with Petronas is not ruled out, she added.
“There are ongoing discussions at the highest level between the state and federal governments under the MA63 committees,” said Dionysia.
“These relate to oil royalties, cash payments and the continental shelf which involve both existing state and federal legislation.”